Correlation Between Chewy and Sea
Can any of the company-specific risk be diversified away by investing in both Chewy and Sea at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chewy and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chewy Inc and Sea, you can compare the effects of market volatilities on Chewy and Sea and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chewy with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chewy and Sea.
Diversification Opportunities for Chewy and Sea
Very weak diversification
The 3 months correlation between Chewy and Sea is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Chewy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chewy Inc are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Chewy i.e., Chewy and Sea go up and down completely randomly.
Pair Corralation between Chewy and Sea
Given the investment horizon of 90 days Chewy Inc is expected to generate 1.77 times more return on investment than Sea. However, Chewy is 1.77 times more volatile than Sea. It trades about 0.16 of its potential returns per unit of risk. Sea is currently generating about 0.18 per unit of risk. If you would invest 1,691 in Chewy Inc on August 24, 2024 and sell it today you would earn a total of 1,896 from holding Chewy Inc or generate 112.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chewy Inc vs. Sea
Performance |
| Timeline |
| Chewy Inc |
| Sea |
Chewy and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chewy and Sea
The main advantage of trading using opposite Chewy and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy position performs unexpectedly, Sea can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sea will offset losses from the drop in Sea's long position.The idea behind Chewy Inc and Sea pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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